Deutsche Bank shares slumped on Friday, putting the health of another globally systemic important bank in the spotlight heading into the weekend.
The German lender’s shares DBK, -13.24% fell 8% in Frankfurt trade, and the Euro Stoxx bank index SX7E, -6.28% fell 4%.
Deutsche Bank’s 5-year credit-default swaps widened on Thursday, in what Reuters reported was the largest one-day rise in its history.
It should be noted that Deutsche Bank’s 5-year credit-default swap, which was 175 on Thursday, is nowhere near the peak for Credit Suisse, which was 1,194, according to S&P Global data. The higher the value of the CDS, the more likely the market sees the issuer defaulting.
Deutsche Bank’s AT1 bonds have tumbled in value after Switzerland wiped out Credit Suisse’s CSGN, -6.92% securities in the deal for it to be taken over by UBS UBSG, -6.54%.
Invesco AT1 Capital Bond UCITS ETF AT1, -3.74%, which invests in these convertible bonds, have dropped 18% this month as investors lose faith in the securities. European and other banking regulators across the globe have insisted they will not follow Switzerland’s precedent, and first let bank equity fall to zero before wiping out the convertible securities in the event of a failure.
UBS UBS, -6.03% also is feeling the stress in a deal that the banks say might not complete this year. UBS shares dropped 5%.